Thursday, October 05, 2006
AMARIN PRINTING & PUBLISHING PUBLIC COMPANY LIMITED (APRINT)
Company with potential growth, rock solid balance sheet and competent management
Disclaimer
The author has a stake in APRINT. His opinion given in this article might be prejudiced although he has tried his best to maintain the neutral position. The data presented in this article is carefully verified by the author to ensure that it is as accurate as possible. However, he can’t ensure that there will not be any mistake. To use the information in the article for one’s own investing, the liability shall not be born to the author.
What will come first in your mind when talking about Amarin Printing, or APRINT for short? To me, Baan Lae Suan Magazine, Praew Magazine, National Geographic (Thai Edition), Nai-in Bookstore and Davinci Code (Thai Edition). I believe everybody should have heard these names and some might even be the subscribers of those magazines or regular customers/readers of APRINT’s products.
APRINT have, in total, 10 magazines under its name and most of them are the leader in the sector they target. For example, according to the survey carried out by SE-ED in 2005, Baan Lae Suan and Room are the first and second, respectively, in the house and decoration segment.
In addition, APRINT also owns several publishing houses publishing variety of books using the contents in the magazine it published.
Revenue
Revenue of APRINT comes from three main sources, which are printing business, magazine & book business and advertising. These 3 main channels of income account for 90% of total revenue. The remaining 10% is derived from Fair & Event business and Tour & Training business.
Printing Business
Revenue from printing business is accounted for about 30% of total revenue in 2005. It steadily grew from 300 MB in 2003 to 385 MB in 2004 and to 474 MB in 2005. During the past few years, the company is extensively upgrading its printing facilities and infrastructure. This backward linkage investment will improve the quality and efficiency in printing, thereby, reducing the cost of printing its own magazines and books. The proportion between external and internal printing jobs is 53% to 47%. However, the company does not disclose the operating profit margin. The revenue from this channel is expected to grow steadily in line with the growth in sales of the magazines and books.
Advertising
Revenue from advertising, the highest among the three main sources, is accounted for 35% of the total revenue or 520 MB, equivalent to 4% increase from a year ago. In the same period, the advertising expenditure through magazine, according to Nielsen Media Research (Thailand), grew by 8.45% to reach 6,638 MB. The slow growth in this area is attributed to the worried of the corporate to the uncertainties in economy and political situation in Thailand, hence reducing the advertising expenditure. However, once the economy outlook is better, the revenue from advertising will grow as most magazines under APRINT are in the top in the sector they target in.
Magazine & Book
One quarter of the revenue is derived from selling magazine and books. In 2005, it recorded 374 MB compared with 340 MB achieved in 2004. APRINT produces a variety of books ranging from mystery novel, health, dharma, children, etc. Content from its magazines is recompiled and published in books. Potential of growth in this area is high since the rate of reading in Thailand is still relatively low compared to developed countries (In 2005, around 70% of population age above 6 is reading and average time spent for reading is about 2 hours per day). In addition, number of books published will increase along with the expansion of bookstores nationwide by SE-ED.
Gross profit margin from magazine and book business (including revenue from advertising is 20% (constant since 2004).
Content Business – Value Creation
Contents developed for its various magazines are used to expand into event organizing, tour and training, and media business. The revenue in this new area is about 10% of the total revenue. It grew from 88 MB in 2004 to 111 MB in 2005 but operating profit declined from 36 MB to 30 MB (higher cost due to more events organized). APRINT still focuses and attempts to bring out the most from its content in order to generate more revenue and profit.
Table below summarizes APRINT’s revenue structure and growth rate from 2001-2005.
Profitability
Although APRINT has managed to increase its revenue in the mid-teen region for the past five years, its net profit growth is erratic. It managed to achieve net profit growth of 69% in 2002 but subsequently the growth rate is hovering around 10% with an exception of year 2003 which saw a growth rate of merely 1% due to a huge loss from its subsidiary.
From the table shown below, the expenses (both cost of goods sold and SG&A) are rising hence reducing the net profit margin. Net profit margin declines from 19% in 2002 to 15% in 2005. As a result of huge capital expenditure outlay a few years ago to upgrade its printing facilities, its net profit will be hampered by larger depreciation. To boost its profit level, APRINT should seriously establish strategy to control operating costs.
Owner’s Earning is rising gradually albeit large CAPEX for upgrading its printing facilities. Once this upgrading campaign is complete, the Owner’s Earning will increase substantially from the current level.
Future Prospect
Advertising Revenue
Adverting expenditure through magazine is stagnant for the first 8 months of 2006, totaling 3690 MB according to Nielsen Media Research (Thailand). Competition is fierce as there are many magazines launched (estimated 1-2 magazines per week). APRINT plan to capture this pie is launching 1-2 new magazines per year (in 2006, SHAPE is launched) and strengthen the presence of its leading magazines. The company expects the advertising expenditure to grow around 8-10%. With this regard, revenue from advertising is expected to grow at the same rate as that of the overall industry.
Printing Revenue
APRINT sees a good growth of revenue from this sector, more than 20% during the past two years. We can expect no less for the coming years as the amount of books and magazines printed is increasing. In addition, the establishment of Commercial Printing Division to penetrate into the printing works for other corporate could bring in more revenue. This will keep its printing facilities running in full capacity. The upgrading will bring in further value through quality printing.
Magazine & Books
Moderate growth can be expected for this year (about 10%). Davinci Code and other unputdownable mystery series, not to mention other categories, attract lots of readers. I hope that the company can churn out more and more of this kind of books. As mentioned above, the reading rate is still very low therefore there are plenty of rooms to grow in the long term. It is just a matter of how much the company can capitalize on this trend.
Content Business
Although content business represents only 10% of total revenue at present but one can’t overlook it as its growth rate is more than 20% during the past years. I believe that the management can bring out the most value from its comprehensive content.
Valuation
My estimates for the next five years are as follows:
Revenue growth from advertising = 5%
Revenue growth from printing = 15%
Revenue growth from magazine & book = 10%
Revenue growth from content business = 20%
Let’s take the figures from 2005 as a base year and project to year 2010. So, in 2010
Revenue from advertising = 663 MB
Revenue from printing = 954 MB
Revenue from magazine & book = 602 MB
Revenue from content business = 276 MB
Total revenue = 2,495 MB (11% CAGR)
Let’s assume the company can maintain the net profit margin at 15%, in year 2010
Net Profit = 374 MB (10% CAGR)
EPS = 1.87 Baht
P/E Ratio = 10 times
Share Price = 18.7 Baht
Let’s further assume that the dividend paid out rate is 60%, along the period of 5 years, the accumulated dividend is amounted to 4.59 Baht per share.
At today’s price (19 Sep 2006) of 11.20 Baht, the expected total shareholder return over the next five years is about 12.10 Baht, doubling the money invested initially (15.8% CAGR).
Conclusion
I think that APRINT can achieve CAGR of revenue and net profit of about 10% over the next five years. APRINT needs to focus on cost controlling so that it can maintain or surpass the net profit margin at this level (15%). I hope that the company does not have to invest heavily in its facilities therefore it can pay high dividend to shareholders. For this case, dividend paid out contributed almost four-tenth of the total return, bringing the CAGR to 15.8% over 5 year period (even with growth of revenue and profit of 10% assumed).
Disclaimer
The author has a stake in APRINT. His opinion given in this article might be prejudiced although he has tried his best to maintain the neutral position. The data presented in this article is carefully verified by the author to ensure that it is as accurate as possible. However, he can’t ensure that there will not be any mistake. To use the information in the article for one’s own investing, the liability shall not be born to the author.
What will come first in your mind when talking about Amarin Printing, or APRINT for short? To me, Baan Lae Suan Magazine, Praew Magazine, National Geographic (Thai Edition), Nai-in Bookstore and Davinci Code (Thai Edition). I believe everybody should have heard these names and some might even be the subscribers of those magazines or regular customers/readers of APRINT’s products.
APRINT have, in total, 10 magazines under its name and most of them are the leader in the sector they target. For example, according to the survey carried out by SE-ED in 2005, Baan Lae Suan and Room are the first and second, respectively, in the house and decoration segment.
In addition, APRINT also owns several publishing houses publishing variety of books using the contents in the magazine it published.
Revenue
Revenue of APRINT comes from three main sources, which are printing business, magazine & book business and advertising. These 3 main channels of income account for 90% of total revenue. The remaining 10% is derived from Fair & Event business and Tour & Training business.
Printing Business
Revenue from printing business is accounted for about 30% of total revenue in 2005. It steadily grew from 300 MB in 2003 to 385 MB in 2004 and to 474 MB in 2005. During the past few years, the company is extensively upgrading its printing facilities and infrastructure. This backward linkage investment will improve the quality and efficiency in printing, thereby, reducing the cost of printing its own magazines and books. The proportion between external and internal printing jobs is 53% to 47%. However, the company does not disclose the operating profit margin. The revenue from this channel is expected to grow steadily in line with the growth in sales of the magazines and books.
Advertising
Revenue from advertising, the highest among the three main sources, is accounted for 35% of the total revenue or 520 MB, equivalent to 4% increase from a year ago. In the same period, the advertising expenditure through magazine, according to Nielsen Media Research (Thailand), grew by 8.45% to reach 6,638 MB. The slow growth in this area is attributed to the worried of the corporate to the uncertainties in economy and political situation in Thailand, hence reducing the advertising expenditure. However, once the economy outlook is better, the revenue from advertising will grow as most magazines under APRINT are in the top in the sector they target in.
Magazine & Book
One quarter of the revenue is derived from selling magazine and books. In 2005, it recorded 374 MB compared with 340 MB achieved in 2004. APRINT produces a variety of books ranging from mystery novel, health, dharma, children, etc. Content from its magazines is recompiled and published in books. Potential of growth in this area is high since the rate of reading in Thailand is still relatively low compared to developed countries (In 2005, around 70% of population age above 6 is reading and average time spent for reading is about 2 hours per day). In addition, number of books published will increase along with the expansion of bookstores nationwide by SE-ED.
Gross profit margin from magazine and book business (including revenue from advertising is 20% (constant since 2004).
Content Business – Value Creation
Contents developed for its various magazines are used to expand into event organizing, tour and training, and media business. The revenue in this new area is about 10% of the total revenue. It grew from 88 MB in 2004 to 111 MB in 2005 but operating profit declined from 36 MB to 30 MB (higher cost due to more events organized). APRINT still focuses and attempts to bring out the most from its content in order to generate more revenue and profit.
Table below summarizes APRINT’s revenue structure and growth rate from 2001-2005.
Profitability
Although APRINT has managed to increase its revenue in the mid-teen region for the past five years, its net profit growth is erratic. It managed to achieve net profit growth of 69% in 2002 but subsequently the growth rate is hovering around 10% with an exception of year 2003 which saw a growth rate of merely 1% due to a huge loss from its subsidiary.
From the table shown below, the expenses (both cost of goods sold and SG&A) are rising hence reducing the net profit margin. Net profit margin declines from 19% in 2002 to 15% in 2005. As a result of huge capital expenditure outlay a few years ago to upgrade its printing facilities, its net profit will be hampered by larger depreciation. To boost its profit level, APRINT should seriously establish strategy to control operating costs.
Owner’s Earning is rising gradually albeit large CAPEX for upgrading its printing facilities. Once this upgrading campaign is complete, the Owner’s Earning will increase substantially from the current level.
Future Prospect
Advertising Revenue
Adverting expenditure through magazine is stagnant for the first 8 months of 2006, totaling 3690 MB according to Nielsen Media Research (Thailand). Competition is fierce as there are many magazines launched (estimated 1-2 magazines per week). APRINT plan to capture this pie is launching 1-2 new magazines per year (in 2006, SHAPE is launched) and strengthen the presence of its leading magazines. The company expects the advertising expenditure to grow around 8-10%. With this regard, revenue from advertising is expected to grow at the same rate as that of the overall industry.
Printing Revenue
APRINT sees a good growth of revenue from this sector, more than 20% during the past two years. We can expect no less for the coming years as the amount of books and magazines printed is increasing. In addition, the establishment of Commercial Printing Division to penetrate into the printing works for other corporate could bring in more revenue. This will keep its printing facilities running in full capacity. The upgrading will bring in further value through quality printing.
Magazine & Books
Moderate growth can be expected for this year (about 10%). Davinci Code and other unputdownable mystery series, not to mention other categories, attract lots of readers. I hope that the company can churn out more and more of this kind of books. As mentioned above, the reading rate is still very low therefore there are plenty of rooms to grow in the long term. It is just a matter of how much the company can capitalize on this trend.
Content Business
Although content business represents only 10% of total revenue at present but one can’t overlook it as its growth rate is more than 20% during the past years. I believe that the management can bring out the most value from its comprehensive content.
Valuation
My estimates for the next five years are as follows:
Revenue growth from advertising = 5%
Revenue growth from printing = 15%
Revenue growth from magazine & book = 10%
Revenue growth from content business = 20%
Let’s take the figures from 2005 as a base year and project to year 2010. So, in 2010
Revenue from advertising = 663 MB
Revenue from printing = 954 MB
Revenue from magazine & book = 602 MB
Revenue from content business = 276 MB
Total revenue = 2,495 MB (11% CAGR)
Let’s assume the company can maintain the net profit margin at 15%, in year 2010
Net Profit = 374 MB (10% CAGR)
EPS = 1.87 Baht
P/E Ratio = 10 times
Share Price = 18.7 Baht
Let’s further assume that the dividend paid out rate is 60%, along the period of 5 years, the accumulated dividend is amounted to 4.59 Baht per share.
At today’s price (19 Sep 2006) of 11.20 Baht, the expected total shareholder return over the next five years is about 12.10 Baht, doubling the money invested initially (15.8% CAGR).
Conclusion
I think that APRINT can achieve CAGR of revenue and net profit of about 10% over the next five years. APRINT needs to focus on cost controlling so that it can maintain or surpass the net profit margin at this level (15%). I hope that the company does not have to invest heavily in its facilities therefore it can pay high dividend to shareholders. For this case, dividend paid out contributed almost four-tenth of the total return, bringing the CAGR to 15.8% over 5 year period (even with growth of revenue and profit of 10% assumed).
